Bank lending still a source of instability says former FSA chief

By: InformationDaily.TV video team
Published: Tuesday, October 14, 2014 - 09:59 GMT Jump to Comments

The way banks lend money, and their ‘natural tendency’ to lend against real estate, is a continuing risk to the stability of the economy says Lord Adair Turner.

The former chairman of the Financial Services Authority, interviewed by InformationDaily.TV at the 2014 European Conference on Banking and the Economy, said that there was ‘some way to go’ before policies were changed to correct instabilities inherent in the system.

These instabilities were linked to the amount of credit in the economy and how this was allocated between investment in capital goods, real estate, and consumption. Before the financial crisis of 2007/08, central bankers and regulators took the view that this didn’t matter, so long as inflation was low and stable. However, Lord Turner argues that this view is mistaken, and worryingly, that little has changed since the crash, because the ‘intellectual argument is still to be won.’

Following a career in industry, banking and consultancy, Adair Turner was Director-General of the Confederation of British Industry (CBI) 1995-9, and from 2000-6, was Vice-Chairman of Merrill Lynch Europe. He was Chairman of the Financial Services Authority 2008-12. He currently holds a fellowship at the Institute for New Economic Thinking. He was made a life peer in 2005.

The 2014 European Conference on Banking and the Economy (ECOBATE 2014) took place in Winchester on 8 October) and was organised by the Centre for Banking, Finance and Sustainable Development (CBFSD) at Southampton University and led by Professor Richard A. Werner, D.Phil. (Oxon), Chair in International Banking and Director of the CBFSD.
 

 

 

The views and opinions expressed in this article are those of the author(s) and do not necessarily reflect the official policy or position of The Information Daily, its parent company or any associated businesses.

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